Bunge Global SA ($BG)

Okay. We're excited to kick off the afternoon with a discussion with Bunge. Since assuming their current roles in 2019, CEO, Greg Heckman, and CFO, John Neppl, have transformed Bunge's earnings potential through materially improved operational execution and expanded foot-printing capabilities and accretive capital allocation, and Bunge is poised to demonstrate the power of its expanded network over the coming years with Viterra integration progressing and improving operating environment and in-flight capital projects nearing completion. We're pleased to have CEO, Greg Heckman, and CFO, John Neppl, with us today to discuss Bunge's strategy and outlook. Thank you both for being here.

Thanks for having us.

Absolutely. And so maybe where I wanted to start is looking back. You're right now approaching the 1-year anniversary since Bunge's closing of the Viterra acquisition. Can you remind us of the deal rationale? Have there been any big surprises and since bringing those 2 companies together and maybe how far away we are from seeing the true capabilities of the combined company?

So I'd say no big surprises. So we're really thrilled about how things are going. But yes, if you back up to the strategic rationale, I think everything we've been doing since we arrived at Bunge was really focusing on ensuring that we have the capabilities to be the partner of choice for our customers, and that's the farmers and the consumers of food, feed and fuel. And everything that we were trying to do strategically to improve the capabilities of our global infrastructure to serve our customers lined up really well with Viterra's capabilities. And so when you think about we put those companies together, they were much more upstream on the origination and it really folded-in well with our processing. And so -- they also brought us some Oilseed Processing on soy and sun seed on the soft side that fit very well, but just couldn't be more pleased about how the assets fit together, how the teams have culturally really taken off hitting the ground running, the progress that we've made against, early on cost synergies, but more importantly, on the commercial synergies. So feel really good. It's just kind of accelerated everything we want to do strategically, not only from the assets, but most importantly, the people, because they make all the difference in this industry.

So now that you have this expanded network, can you talk about the capabilities that gives you, obviously, much bigger in Argentina [ and crossing ] some of the other things that you talked about, how does that enable you to flex and tap into pockets of opportunity kind of year round?

Yes. If you think about it, we now touch more farmers directly than anyone else on the globe. So we are in all the key producing markets with more capillarity and granularity than anyone else. But most importantly, we can now connect those farmers to the consumers of feed, food and fuel because we're also in all of the key consuming markets with more capillarity and granularity than we've ever had. When you look at our crushing footprint, we're now the largest global oilseed crusher. On soy, we added a key asset. You talked about in Argentina. We added Viterra Renova asset, which is the largest global crushing facility and the lowest cost crushing facility on the globe. And it was being done alone before, and it's now plugged into our global network, and it gave us that geographical balance that we were kind of lacking in Argentina before. And then on the sun seed side, we've got some great capabilities with their Argentine sunseed crush, which now offsets our European sunseed crush. And so we're there for those customers right through the year-round cycle. So very, very excited about that capabilities that it brought us.

You had spent several quarters talking about lack of visibility. The demand environment was a little spotty, more hand to mouth. And we've gotten the RVO. How has the demand environment evolved over the last several weeks and months?

Yes. Well, the obvious thing is demand for veg oil has gone up dramatically. And I think a lot of our customers -- on the downstream side, the energy industry, they were waiting, right, for certainty. I mean everybody was waiting for certainty, even to some degree, the food industry was holding off. And what we see now is engagement on that side, in particular, related to RVO, not only the energy customers engaging with us but the food industry as well now, they kind of see now, where things are headed. Now a lot of oil stocks were built up as we anticipated the RVO. I think everybody kind of knew it was coming, but no one had conviction to really go price forward and really make commitments. So the industry continued to crush, and continue to store the oil. Now what we're seeing is demand likely here in the near term will outpace the production for a period of time until we pull these stocks down. And then ultimately, we'll find the right balance of supply and demand. But it definitely has provided that certainty everyone was waiting on.

The RVO and biofuels policy in the U.S. has got so much. But obviously, it's not just a U.S. story in terms of growing biofuels demand. Can you discuss what you're seeing in some of the other parts of the world, what opportunities these energy policies kind of bring to you guys, in particular, Brazil, Indonesia. How should we think about that?

Sure. We're definitely seeing, I think, a different posture globally as people think about fuel-security as well. And the demand is kind of up and to the right. So even in Europe, we just saw what happened on RED III, changing some of how [indiscernible] treated, that's going to drive more demand for rapeseed oil. So that will be good for softseed crush there in Europe. If you look at what's happening in Brazil, currently B15, they're talking about going to B16. They're doing some testing with fuel fleet to see how quickly they could move to that. And of course, that is all they've set their goal on the fuel of the future to get to B20. So they're on that path. And then you look at Malaysia, which hasn't been talked about as much as Indonesia, but they're trying -- their goal is they're working to get to a B10 on palm oil blending. And then Indonesia is on their path. They've been the most aggressive about domestic demand, and they're on their path to B50. And then there are a number of projects. Of course, we're partners in biofuels with not only Repsol, but Chevron and then we continue to talk to a number of [indiscernible] there are projects being looked at all around the globe, and I think people just believe that, that policy around biofuels is going to continue to be constructive and that's great, very supportive for the oil leg and to be able to run our global footprint. So we like the trend up and to the right.

Okay. And maybe in that context, I mean, we've seen where crush margins, particularly in the U.S. have gotten much better. Can you maybe compare and contrast current crush fundamentals globally versus what we saw in 2022, 2023 when things were obviously [indiscernible] very strong.

Yes. We're definitely seeing -- if you look across Bunge's gold footprint, average crush margins across soy better than last year, even though they're heavily inverted that, of course, the big driver to that has been the U.S. here in North America around RVO policy, softseeds as well globally across our footprint. Average crush margins better than a year ago, again, heavily inverted but driven as well by North America and some of that softseed crush in Argentina with good seed supply there. So environment is good. There still is a lot of uncertainty in the back half of the year. We've got to see crops develop here in the northern hemisphere. We've got to continue to see kind of how the Middle East conflict plays out. That's definitely keeping some of people from committing, farmer as well forward, but especially some of the food in feed consumers out farther on the curve. And I think some of that uncertainty is shown there. But that has the opportunity to kind of improve a month at a time or a quarter at a time as we go forward, depending on the fundamentals.

And I might just add, Andrew, that versus '22, '23, we're close on the crush margins themselves, but where we see a little bit of differences on refining premium side isn't quite as robust today, and we didn't expect it to be. A lot of pretreatment has been built. The energy companies have taken some of that -- the goal to take some of that margin in-house. But we also expected the margin -- some of that margin potentially move back into the crush. And I think we're seeing some of that. So we're really happy with the crush margins, obviously, where they are today. The refining premiums have actually been fairly resilient. We're not at that '22, '23 level, but the demand for refined oil has still been good. The energy or the food companies have been -- demand has been good. So it's setting up pretty well.

You mentioned inverted curves in the back half of the year, some of the other uncertainties that you which of those are maybe most material to the outlook positively or negatively depending on how they go? And I guess, how do you navigate what seems to be a daily changing evolving environment?

Yes. I mean first is kind of how we navigate. I mean think one of the things that we've been most pleased about or the way that the teams are working together because the diversification we now have across geographies across crops, across our capabilities to serve all customers. It is also allowing us the visibility into the physical price curves, the liquidity to be able to hedge ourselves and manage against the things we can control and then stress test and protect ourselves against possible outcomes on the things that we can't control. And that's really about mining the optionality out of this global network as we serve our customers. So I think that, when we talk about commercial synergies and in some of the upside going forward, a lot of that is in the execution, those are things that we control. The things we don't control, of course, how the crops develop here in North America and then in South America, how long the conflict in the Middle East carries on, what that can mean the energy prices which kind of not only find their way through fertilizer, but into our manufacturing cost into all the transportation costs. And then also from a nutrients and input cost, if that starts to change, shifts in acreage, what that does to the balance sheet, have to pay attention to that. And then ultimately, we're in a year that's got a higher percent of [ El Nino ]. And if you get a weather event and what that means to be based on whether the farmers have cut back nutrients and started to mine the soil somewhat with whatever shift in acreage and then whatever effect you could get from weather. So there's a lot that could happen to shift things either way, pretty dynamic. But I'm glad to be sitting here with a very global footprint and a great team.

On the -- I guess I wanted to get your perspective on the South America farmer. There's a lot of dialogue about what's going on with fertilizer prices and the implications in the U.S. and acreage and those types of things. Our understanding is that there's a lot that was prebought, so maybe there's a little bit of insulation there, but maybe the South American farmer doesn't have as much of that because of the timing. So what do you think maybe the potential implications are the health of the farmer in South America? Any perspective on what your thinking around that?

Yes. We see North America kind of as you said, in the U.S., most of the nutrients and inputs were in place. And so we think ultimately it'll shake out that there may be a low single-digit percentage change to oil seeds, but not a big shift. The key will be spring of '27. If this drags on, we want to really watch what's going to happen in the U.S. and North America spring '27. In South America, the Brazilian farmer is in pretty good shape. They've had a good run. It's been a good few years. They've continued to expand, if you look -- continue to have record production in soybeans. They are -- they were buying fertilizer early, but they're not as covered as the U.S. was. As prices have moved up, now it will be important to see what's that behavior going to be? What's the crop mix going to be? And if they cut back, that will be something to watch on yields. So that will be key if this continues on how that shakes out in the fall. So we're watching that. It's a big flag.

Okay. With some of the geopolitical unrest, maybe some of the drought risk. Are you seeing more opportunities to serve customers? Is that creating some opportunities there that maybe weren't before?

Yes. I would say ever sense that we put this platform together, we're just way more complete with our end customers and especially on the feed side, where we now have the feed grains and in the protein meals, to be that complete supplier. So the conversations we're able to have not only with our farmer customers, whether our consuming customers on feed, food and fuel of the problems that we can solve, whether it's logistical, helping them hedge out on the price curve. They are very different conversations and very strategic -- and I think that is one of the huge benefits. And I think that's some of the resilience that you've seen what we were able to do here in the first quarter and how we're thinking about the balance of the year.

When I think about your earnings baseline, one of the areas, there's some areas that have been good guys. One of the areas that's been maybe a bad guy has been on the merchandising side. When I think about demand China has been pretty volatile from a demand perspective. Do you feel like China demand is structurally different than it was before? Can that ever come back to kind of the levels that we've seen historically, maybe there's just geographic shifts. How do you think about China within the demand upside?

Look, it's still absolutely one of the most important markets. across all of the Grains and Oilseeds. We also operate in China in crushing, which is -- our team does a great job connecting that value chain from the farmer, all the way through. So I think we run at higher capacity utilization than some because of the way we're organized. The demand slowed some, some of the profitability in the animal segment, especially in pork has come off some. And then, of course, long term, we know they continue to work to be more self-sufficient in developing their own ag production and their own yields as they prioritize food security, but they're always going to have multiple origins. That's why they want the relationship with the U.S. and with South America, for food security to have the flexibility to need those markets at different times of the season. So continue to be, I think, the most important customer.

Okay. If the conflict in the Middle East were to end question is how does that change your fundamentals? But I think ultimately, what people are struggling to understand is how much is fundamental and how much is a product of some of these geopolitical -- from a firmly fundamental perspective. So how do you think about that? What would maybe be the implications?

Yes. I think how we think about it, these -- when these shocks happen, they generally, there's a short-term -- and if you look back to the Ukraine conflict, there's a short-term shock, which can be positive or negative. But that's really short term. Then it's structurally things get more complex in the financial markets where at first, but then physically, you've got to move the goods, and you've got to get them where they're going. So for example, in the Middle East, it's -- we have not had an interruption on the supply chains, but we've had a disruption of the supply chain. So it's created complexity, it's created additional costs, different ports, moving things over land, but we're able to take care of the customers. What you -- what we're debating should it end what's kind of a short-term impact, a midterm impact and a longer-term impact. Short term, you'll see people have been pulling their stocks down. So you'll see people replenish those stocks and rebuild pipelines, which has gotten shorter. Then you'd argue, you may see additional security stocks build. And that may not only be in the Middle East, globally. I think people are less comfortable with what's the order of the possible. Their stress testing is a different answer today than it was 2 years ago or 5 years ago. So you may see additional security stocks built globally, and that may kind of start to change some of the S&Ds that what looks like a heavier stocks to use, some of the stocks aren't available to the rest of the market. And so you've really got to think about what is the real balance. That ultimately means more volatility more dislocation, if we have a weather problem or some other government policy change or some other trade disruption. And that's what we're really built to help solve. And then as your solving those physical things, that's generally when you get paid for managing that risk and kind of untangling that problem.

Okay. That's helpful. I feel like I always ask you about soybean meal and kind of surprisingly resilient demand. I know I do. I know I do. I'm going to ask you again, there was just so much concern in the market about like, hey, we've got all this crush capacity coming online. What are we going to do with the soybean meal"? And here we are. I think Soybean meal has been a really nice piece of the story, surprisingly positive piece of the story. Have you been surprised, did the market just get it wrong? Maybe what's been driving that resilience?

Yes. I think if somebody goes back and look, we always said the meal will find a home. The market will work and people love to feed soybean meal. It is the most effective nutrient in the price of lysing matters, the price of feed grains matters and feed grains have been very well supplied, and they've been feeding very high rates of soy and corn. We also talked about the fact that Bunge, we were net short of -- we're marketing way more soybean meal than we produce before Viterra, we still continue to -- and we were making investments, right, in our handling facilities in the river and the P&W and in the Gulf to have additional capabilities to be able to export soybean meal to feed those customers. And part of that was we said that we believe the rest of the world was operating at lower inclusion rates than we were seeing the more developed and more sophisticated markets do. So we thought there was not only going to continue to be volume growth, which continues to tick away, whether its just purely the number of people in the globe but also wealth of the middle class, and they're eating more animal protein or -- animal protein, which means more meal demand. So I think that's continued to take away and then the higher inclusion rates as well. And then we've tipped that whether GLP-1s or the food permits now been kind of tipped over in the U.S. I mean, I think there seems to be a bit of a shift to protein, from carbs and then you've got very high beef prices. So people are eating more pork and more poultry, which, of course, need a lot more meal. So you've got just -- it's no one factor, but it's a number of factors, but it continues to deliver.

Given the strength of what we see on the curve, would you expect a similar type of supply response at some point? Do we see more crush capacity come online or are conditions different now than before where maybe that's not the case?

Most of the crush in the U.S. has been built out. I think maybe there's another 5% to come online or something. Our plant is going to come online later this year in [indiscernible]. I think some of the investors and as the [indiscernible] saw that if you got a the financials are one way if you've got a network to plug into. If you're stand-alone, it's a little bit -- can be more challenging at times. So I think that matters also the cost to build replacement costs now for about a 5,000 ton plant is about $1 billion. So that's a different calculation for the investors. And you're not hedging these plants when you spend that kind of money for 3 months or 3-years and you can't hedge them for 3-years. I mean these plants live for over 3 decades. So the first thing that happens is de-bottlenecking. There could be some of the soy capacity be switched over to soft capacity as oil drives the leg, you could see some of that shift. And then eventually, if the economics are there long enough and the risk is right, there could be some capacity added, but we don't think that will be the first thing done.

Okay. And what we've seen, Andrew, in particular, with our experiences, labor is really hard to get, particularly the talented belt skilled labor, to electricians and all the stuff we need to get done at the plant. The construction trade, really, really very tough to get. Resources are scarce because there's so much other building going on data centers and all that kind of thing. And as Greg mentioned, the cost, I mean, we are feeling much better today that we're at the tail end of our 4 large projects and at the beginning of because it's been a challenge in it. We only see it getting a little bit tougher here in the near term.

Okay. We talked about some of the risks on the crop side that kind of may or may not be there. If you talk about how the platform is positioned to deal with periods of crop disruption in certain regions. I guess, there's a lot of discussion about drought and things like that happening right now. So I guess when we see those headlines when we see estimates changing, how should we think about the potential implications for your business?

I think that even if you look at Q1, where Merchandising was very challenging because the balance sheets continue corn, and wheat continue to be well supplied globally. But a number of the assets in our system are flexible, whether it's origination or storage or the ports and we can then point those to support the oilseeds, soft and soy crush there in the first quarter, to support where the margins are. So we're able to look to where is need for our customers and where are the best margins, that's where we put our global system to work. So if you end up with seeing South America, grow less corn and grow more soy because of the fertilizer prices. Their ethanol productions continue to grow down there. So they got more domestic demand. So you've got less corn exports out of South America. We'll move those assets over to soy, more soy supply will be good for our crushing and our soy exports, but then that opens up the opportunity for more corn exports out of the U.S. So we'll shift the global system to serve the customers and where the margins are to run it. And that's the other thing you talked about Argentina. In the past, when Argentina would run harder, it could be bad for the global crushing and we were underrepresented in Argentina. Now we're not only the biggest crusher in Argentina, we're the lowest cost crusher in Argentina, and it balances our global system -- so we now can benefit our Argentina continues to recover and decide where we run the crush harder, whether that's in Argentina or whether that's in Europe. So the optionality that exists in our global system not only helps us ensure that we serve our customers that we ensure that we serve our stockholders.

Okay. I wanted to ask about the mid-cycle baseline. You guys recently updated at the Investor Day. At the time you got a question and acknowledged that there was some remaining uncertainties. We didn't have an RVO. You're guiding into that, so had to navigate that. Now that we have finalized RVO details, is there anything you would have done differently with respect to the baseline what you articulated at the Investor Day?

Yes, not really. I think the purpose of our mid-cycle baseline was not to predict where crush margins were going in the next year or 2. It was about looking at our historical results and saying, what do we think kind of in a mid-cycle environment, there's going to be better, that's going to be worse. Where do we think on average have we been over the long run? And we look back at '22 and '23, great years. We looked at '25 not so good. We looked at '19 and '20, not so good. And so we ended up -- and we looked globally as well. We looked at the U.S., Canada, we looked at South America. We looked at Europe. Ultimately, it came with some numbers we said, okay, we'll define it as this that we think has been kind of a historical mid-cycle. Now we may do better than that. And that's fine, and we'll explain that that we're performing above baseline or above mid-cycle, which in the case today, some of our margins are well above mid-cycle. And we'll just explain that. Now in the long run, are we operating at a different level in the future, we'll see. And then there may be a time where it makes sense for us to update that. But ultimately, it was really about just putting a benchmark out there that we could lean to and point to and say, are we performing above or below that. So you look at it today and say, $46 soy crush margin and a $76 soft seed margin, conservative. We do look at it globally, though. We're not as good in Brazil and Argentina right now in Europe, probably in line. So overall, we are performing a little bit above baseline on the crush side, part of that is the reason why we took our forecast up $1.50 on the year after we close Q1. But looking at it over the long run, we've got -- we're underperforming in Merchandising and our Grain Merchandising and Milling segment, which baseline were below baseline there. So there's a lot of moving pieces. But all in all, we feel good about certainly where the crush margins are today versus what we modeled but we'll point to that. We can explain to you, how we're above baseline there. But again, the point of the whole mid-cycle base language kind of set a benchmark, not a predictor, not a forecast. It's a benchmark that we use to help explain where we are from a performance standpoint.

And I may add one thing. The thing we wanted people to really understand out of that conversation was we've got to give the guidance with the mid-cycle. But regardless -- we believe that the global network that we have put together and the team running it, that it has more resiliency in the earnings, the flexibility, the capabilities, the optionality that exists, the reach have in the scope and scale, it definitely means when the environment is above mid-cycle, you're going to see higher highs, right? And that's for sure. And if you look right now in the mix, the Merchandising is behind the oil seeds picking it up, that diversification helps. But the other really key thing is that when things are tougher, you're going to see higher lows and that's part of the resiliency and the diversification that we've built.

Okay. That makes sense. When you have the bridge on the baseline, one of the pieces was implied capital projects, you mentioned kind of here in the end now obviously, the return assumptions within that as you assigned a certain amount of earnings upside from that. Should we assume -- or are the return -- is the return profile better in this environment currently than maybe what is assumed in that bridge, just given kind of the strength of the margin environment, what you're seeing currently?

Yes. I think of it this way. So we build these projects, and we think about a long-term return profile, not any given current market environment. But we do feel pretty good about where they sit today versus what our long-term assumptions were. Clearly, with [indiscernible], which is our -- in our joint venture with Chevron, we're going to bring that online probably at the end of Q3, a very good environment today for that above what we would have assumed, certainly when we modeled it. And so we'll have a head start on returns there, and we'll get a quicker payback on that expansion. And certainly, we're going to like those returns in the near term, obviously. The other projects we have are a little bit less dependent on current crush margins our Morristown facilities, the SPC plant, really more specialty into the food value add going into the food side of things, plant protein based, very, very specific applications for customers. It's going to be less price sensitive, less about the current crush margin. Same thing with our [indiscernible] export terminal. That's really going to be driven by elevation margins and the exports of corn and soybean meal and things like that, how much throughput and demand there's going to be for elevations. And then our big plant in [indiscernible] in the Netherlands, is a refining point is about specialty oils. So it's a little bit less dependent on just crush itself. It's more about the demand on the food side for the specialty oils that we provide and we're going to be a low-cost producer there. And I think we feel very good, again, about the long-term return profile there. So less dependent on the absolute crush margin.

Can you remind us the timing? I know you mentioned one [indiscernible] the other is Q3. But can you remind us the timing of those projects coming on and kind of how we should think about the ramp phasing?

Yes. So [indiscernible], as I said, kind of end of Q3, very similar time frame with our export terminal right across -- basically right across the levy from the crush plant. Those will be late Q3. Really, you got a little bit of ramp-up time with the new plant because effectively, what we've done is built a new plant for the old plant. So your figure is probably going to take 3 to 6 months to really get rolling. We're going to probably start with processing soybeans even though ultimately, that's about soft seed. It's going to be about canola and winter canola mostly through that plant. But we'll be up and running and I think operating pretty well inside a year. The Morristown plant, we started running that plant early this year. We had ribbon cutting last week. That's a little bit more of a time line given food qualification with food customers, the products that -- some of the products we're designing there are unique. It takes a little bit more time to get through the system and commission and get the thing up and running. So we really expect probably not to see a really strong run rate until back half of '27 is when we really think we'll start performing well. And then, of course, with [indiscernible] in Netherlands starting in Q1 of '27 will probably take anywhere from 6 to 12 months, probably closer to 12 months to really get rolling. So I think the impact you'll see in '28 and beyond of all these together, all in various stages of ramp-up during that time.

Okay. I'd love to hear you talk about some of the synergies with Viterra. You obviously gave us an update, kind of laid out some timing at the Investor Day across the network in [indiscernible] synergies. What is still left -- what have you done, what is still left to do? And when you think about upside, I remember, there's a big bar with a little plus on it. Where is the upside opportunity should that come about?

Yes, I can start on the cost side, Greg, and you want to talk about commercial. So on the cost side, we originally had targeted about $250 million. We've got $190 million of savings built into our forecast for '26. So we -- we've -- and as part of our increase that we put in Investor Day, another $0.50 a share, that's roughly taken us up another $100 million of cost synergies. So we moved that $250 million to $350 million. And we're pushing really, really hard to bring that a year sooner. So we're going to have a vast majority of it done by the end of '28. We had originally given ourselves 4 years -- we're backing that up as much as we can. And a big chunk of it, I think, will see significant progress in '27 and then we'll get the vast majority of the remainder in '28. But we feel -- and we're not going to stop there. I mean, now we're looking at how we leverage our global service centers. We've got a couple of key global processing centers where we do a lot of our transactional activity, and we're building more capability there, and we're adding investing in technology as well to get more efficient. And I think -- so we'll -- we look at $350 million is really a stopping point, but then it comes about continuous improvement for the overall company. And we're really, really focused on that. So I would just say we feel extremely good about the progress we've made in a pretty complicated deal, but the teams have done amazing work. And so we're pretty proud of it.

And when you think about the plus and that really comes in the commercial synergies, right? There are some of the things that you're able to do quickly. We talked about we've got 400 vessels a day moving somewhere around the globe. That's already run by one team on one system, one face to the market. That had a lot of leverage. That's already been executed -- things we're able to do and negotiating across our global network, whether it's locally on trucks and rail and barge or on vessels. Some of those things become structural and some of them are just opportunities that are passed along through the value chain between the farmer and the end consumer. But then really, it's the upside becomes on the commercial synergies on the opportunity, and that's really flexing the system, thinking about, okay, not only which assets are we going to run, where do we invest that we have continue to improve our cost footprint, which assets do we not need? Do we have any holes where we need to bolt-on acquisitions? Or do we de-bottleneck and where do we get the combined system really fine-tuned and fit for purpose. And that you just -- those are not -- those become structural. We got to keep them. You see them fall out kind of every quarter. And then depending on the environment, they can be smaller or larger.

Okay. On capital allocation, I believe your leverage ratio is below your target, but I know debt paydown still near-term priority. How much debt are you looking to pay down? Kind of what's the time line to which we should think about that playing out?

Yes. I think when we started the year, we were elevated a bit on our leverage from what our long-term target is. But as we've gone through the year and our earnings outlook has improved. We actually think now will be relatively in line by the end of the year, just from a stronger earnings perspective. So our focus on debt pay down may not necessarily need to be there. I think it's going to depend on how we look at '27 and '28. But I think right now, we feel like we'll be in a pretty good position by the end of the year.

And so -- we've -- if maybe debt paydown is not -- doesn't need to be as much of a focus. What are the alternative uses? And in particular, on buybacks. I know in the baseline, you've talked about $700 million. When is that kind of applicable because you haven't committed to that for this year. So when does that start and just broadly the 50% of discretionary cash flow?

Yes. So our plan for this year, right now, we've got $250 million yet to do related to the Viterra transaction. We plan to and expect to get that done this year, and we should get that done this year. We have really a significant amount of CapEx in our pipeline with the wrap up of those 4 large projects and some other de-bottlenecking projects. So that's going to largely consume all of our free cash flow for the year. But as we head into '27, then we're going to start looking at the new capital allocation formula that we laid out, where we're going to look at 50% of our discretionary cash flow to go back to shareholders in dividends and share buybacks. That will begin in '27 as we determine how much available, it's going to be driven largely by how much cash we're generating. And I think the assumption of $700 million a year of available capital for share buybacks is based on our $13 run rate baseline, that we're forecasting out in the future. If we get there sooner, we'll have more available. But we expect beginning in '27 to start following that formula, whether we get to $700 million a year, if takes us a couple of years to get there or whatever, that's -- it's still out there. And it's again at $13 a share, that should be about $700 million a year of share buybacks. If we make less than that as we ramp up toward that $13, it will be a little bit lower, but we -- that's absolutely going to be a key part of our go-forward plan.

I appreciate it's still early days with Viterra, but you did mention if we need to look at the portfolio, there's bolt-on M&A opportunities, what have you. Is that an area where we could see more capital put to work or maybe what would be the opportunities? What would be interesting as you evaluate the portfolio today?

We're always running that analysis on where is the best return on that next dollar of capital. Jon keeps us honest with his buyback formula, on our returns. And so we want to protect our capabilities and continue to look at how crops are shifting, where customers are growing and looking at those external factors to make sure that where we have those strong networks that we protect those, whether that's your bolt-on de-bottlenecking, brownfield or even greenfields, but we'd always rather buy something to build something. It just goes quicker. You heard us talking about that. And then also any of the gaps that we've got. We want to fill those in to be the partner of choice to have the capabilities that we need to fulfill, in what we expect to continue to be a pretty challenging world, whether it goes back towards globalization where it actually gets easier because every origin has opened every destination or we continue to have de-globalization where it's more complex. And we're going to see more dislocation. We're going to see more volatility and so having those capabilities. So that's where we're constantly thinking about where the capital is, where we improve our networks. And that's why it's across soy crushing, soft seed crushing, our Merchant business with the strong fee grains, corn, our global wheat franchise or our strong milling wheat milling franchise in Brazil. So and, of course, tropical oils and Jon talked about our plant protein business. So we're operating where we feel we have the right to win, where we have the cost structure and the capabilities, and we are very focused in that space.

And while we have a long-term capital allocation strategy, obviously, any given year may not work exactly perfectly because when there's opportunity, sometimes you've got to jump on. And so there may be cases along the way where some of that opportunity to consolidate the industry by an asset that we've wanted. That may come about, and we may need to jump on that at that point. But over the long run, we're still going to maintain that discipline. And we'll explain in the short run. We did this because of this reason, and we'll make it clear as to why we moved on something at any given time because you always say, you got to shoot them while they are flying.

We only have about a minute left. Any final message you want to leave the audience with?

I'd just say it's been it's been great this last year, bringing the teams that Viterra and Bunge together. And we got a 208-year-old company here, but it feels like a newborn. We're having a lot of fun. There's a lot of energy in the company. We've never had more capabilities, more talent to be able to execute against what is probably the most complicated global scenario that we've ever seen. And I'm going to quit saying, it can't more get complicated because it keeps getting more complicated. But I feel really good about where we're at and how the team is performing. And thanks for having us.

Yes. We appreciate you being here. Thank you.